Early birds prosper!

By | April 13, 2011

Did you know that just by investing Rs 1554, at the age of 25, you can manage to create corpus of Rs.1 crore by the age of 60? And a delay of 5 years will draw out Rs 2861 per month, to reach the same figure?

It is a fact that, when you are young, you have lesser responsibilities. So, saving and investments needs to be at its peak during this period. Once you reach your late 30s, responsibilities and needs start to pile up, where you become unable to invest rigorously as you could earlier.

How much you should save?

As mentioned earlier, with the decreased financial burden, you need not spend your entire salary. Most financial advisors believe that if you can save even Rs 500 in SIPs and Mutual funds, can help you earn some returns in the future. But, saving 30-40% of your savings is what is best advised. If you are a person who wants to make a huge corpus, depending upon your age and financial responsibilities, 50% of your salary can go into savings and investments.

But, as you age with experience, your income also starts to rise. In such situations it is very important to take the same percentage of your take home salary and religiously, put them aside for savings and investments. Otherwise, you will not be in a position to beat the inflation and match with your standard of living demands.

What should you consider?

Most youngsters do have the idea to save. But are not sure for what purpose should they be saving. But, considering their youthness, buying a car, or a camera, vacation abroad with friends etc can be considered as goals for which they can start saving.

So, the basic idea here is to, make a list of the goals they have in mind and direct resources accordingly. In doing so, make sure you have a firm stand of not getting into unnecessary debts like a personal loan or any loan, unnecessary EMI payments or even insurance payments that are not required.

Where should you invest?

Considering the option of financing long term goals, it is best to stash most of your savings in the equities market. But if they are for financing short term goals, it is best to invest money into Mutual Funds, SIPs, FDs and sweep in accounts. Try not to keep any cash idle. Parking funds in your savings bank account also helps you to gain some amount of interest.

Review your portfolio

Once you have managed to give a structure to your portfolio, it is very important to review your portfolio in order to ensure if any rebalancing, if necessary, need to be done. It is very important for you to check how the markets are performing so that you can make changes, if there has been a drastic change.

The sooner you begin investing, the bigger corpus you will be able to set aside for your retirement.

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